FALSE ACCOUNTING Richards Sentenced To Five Years

Press, Volume CX, Issue 32386, 27 August 1970, Page 6

FALSE ACCOUNTING Richards Sentenced To Five Years

A term of five years imprisonment was imposed on John Wilson Richards, aged 31, when he appeared before Mr Justice Macarthur in the Supreme Court yesterday afternoon for sentence on 30 charges of false accounting, involving transactions amounting to $322,121.69.

Richards, a former authorised stock exchange clerk, of Byrne ■ and Company, stockbrokers and accountants, and a director of Australasian Secured Deposits, Ltd, a firm dealing in the short-term money market, had pleaded not guilty earlier this month to four charges of false accounting. A jury convicted him on two, and acquitted him of the other two.

In the Magistrate’s Court on August 21 Richards had pleaded guilty to a further 28 charges of false accounting. The Magistrate committed. him to the Supreme Court for sentence. The .two charges of which Richards was convicted in the Supreme Court involved $40,000, and the 28 to which he pleaded guilty in the Magistrate’s Court, $282,121.60. Mr A. D. Holland appeared for Richards, and Mr R. L. Kerr represented the Crown. ,Mr Holland said that when Australasian Secured Deposits was formed in 1963, Richards was 24 and a junior clerk with no qualifications and an obvious lack of aptitude for accountancy work. The company was formed byPatrick John Byrne, clearly for the benefit of himself anil his wife. A reasonable inference was that the only reason Mr Byrne was not a director of A.S.D. was because it would place his seat on the Stock Exchange in jeopardy. Investigations since the winding-up of the company by the police and the liquidator showed, in Mr Holland’s submission, that throughout the history of A.S.D., the company's funds and the sharebroking account of Byrne and Company were used mutually to support each other as the need arose. Byrne and Company’s sharebroking account was used frequently, especially in the early stages, to build up the account of A.S.D., Mr Holland said. When one account was short and the other liquid, a transfer of funds was made; this was very important when the question of sentence was being considered. “Company A Fraud” Richards was a very junior and unqualified person when A.S.D. was formed, and he was trained in that system and that was how it began. From its inception, A.S.D. was a fraud on those who deposited money with it because the company purported to have local body and Government stock to cover the amounts of the deposits; but never at any stage was there sufficient of this stock to equate the money on deposit, and never was any attempt made to make it-so. The fact had to be faced that the funds, of depositors with A.S.D. had disappeared substantially, and it was apparent that the share dealings of Byrne and Company in the last year or so were singularly unsuccessful. “In my submission, the evidence at the trial. and the police statement of facts makes it clear that Richards merely carried on what had been done previously; that is, to use the funds of A.S.D. to make up for what had, in the past, been temporary shortages in the sharebroking account of Byrne and Company,” said Mr Holland. False Entries The amount became so large that Richards panicked and made false entries in the books of account in what was “a pretty stupid attempt to disguise the position.” That attempt was nothing more than a disguise that would stand up only to a superficial examination. A thorough examination would have disclosed the true position. The figure of $282,121.69 referred to in the statement of facts presented by the police on the 28 charges in the Magistrate’s Court was a true one. but misleading because It involved payments frbm A. S. D. to Byrne and Company but did not take into account repayments by Byrne and Company to A.S.D. It was agreed by the Crown prosecutor that the outstanding amount in the transfers between A.S.D. and Byrne and Company which had not been repaid, including the $40,000 involved in the two charges heard in the Supreme Court, was $180,121.69. “This is still a huge figure but for the purpose of accuracy it is more reliable when you look at the over-all position,” Mr Holland said. “But it may well be that your Honour will consider that it will not make much material difference.” Dealing with the statement of facts presented in the Magistrate’s Court, Mr Holland said that it contained what Richards said when he confessed, and most of what could be said against him. Where there was a conflict between what Richards said and what Mr Byrne said, the statement relied on Mr Byrne’s version. The $70,000 referred to in the statement of facts as being used by Richards to pay share- 1

broking debts in the United) Kingdom was not true, ac-l cording to his instructions. Mr Holland said. That money! was paid to enable shares to be purchased in Britain, not to pay for shares which had already been purchased. “This man obviously wrongly believed that he could make better investments for A.S.D. than Government or local body stock by investing i highly-speculative and mining shares," Mr Holland said. Richards faced 30 charges of false accounting, but not one charge of theft, false pretences or forgery. It was his submission that a comparison with sentences imposed on other persons on large-scale theft charges was inappropriate. It had to be conceded that there was obviously a large shortage, but there was no evidence before the Court as to what that shortage would amount to. There was no suggestion by the police that Richards had taken any of the | money for hinfself or personal gain, except for his interest in Bryne and Company. It was also agreed by the police that shares were purchased for every penny that was transferred, so that the money was used to purchase assets. That was substantially different from theft. Unfortunately, many of the assets were worthless because lof the fall in share values, j Whatever the loss suffered by the depositors with A.S.D., lit did not arise because of the crimes for which Richards was to be sentenced. These crimes were false accounting, and the loss resulted from the transfer of funds from A.S.D. to Byrne and Com|pany.

I If Richards had not made false entries in the books, he would not have done anything contrary to criminal law, but it might be different from a civil point of view. The position had been succinctly and accurately summed up in the probation officer s report, which stated that it was apparent that Richards was a young, unqualified man who had had iresponsibilities thrust on him for which he was quite unsuited and which he was incapable of handling. “Position Accepted” Mr Holland asked his Honour to give Richards credit for his co-operation with the police, and for having made no attempt to avoid his responsibilities. It was true that he had defended the earlier charges brought against him but having been convicted on two of them, he had not only decided to accept the position, but had also disclosed voluntarily many other matters. By adopting this course Richards had saved the country, police and the creditors a substantial amount of time and money: and he recognised that he had to be punished. He had spent a whole day assisting the Stock Exchange inspector sorting out the books of Byrne and Company. “He is a young victim of circumstances, some of which were not entirely within his own control.” Mr Holland said. “His wife has suffered more than anyone involved in the case, but she has remained loyal to him. despite the . tremendous stress. He has two young children. “I submit that the evidence of the trial and the contents of the statement of facts support my plea that the interests of justice do not require Richards to be punished on the basis that he is solely to blame for what has occurred.” Serious Charges Mr Kerr said that the charges were serious matters, and that the legislature had thought fit to make the maximum penalty similar to that for theft. The offences were as serious as the crime of theft.

Richards had made false entries to hide the fact that he was transferring money from a company which had accepted deposits on the understanding that it was supposed to have Government and local body stock to cover the amount of the deposits, and he had used the money to purchase highly speculative mining and other shares. Some of the assets purchased by Richards were all but worthless and, a a result, depositors with A.S.D. had lost money.

His Honour said that all 30 charges had been brought against Richards in his capacity as a director of A.S.D., Ltd, now in liquidation. “Over a period of about two years, you falsified the! books of the company in an endeavour to cover up a number of transactions, many of which were highly speculative, and which involved share dealings on the New Zealand. Australian and United Kingdom markets,” his Honour told Richards. “There does not appear to be evidence that you have gained financially from what you have done, and the probation officer states that he can find no evidence of extrava-

gant living.' I will take into account your previous good record and domestic circumstances.

“But I have come to the conclusion that the public interest in this case demands that a substantial term of im-

prisonment be imposed. The offences are of false accounting, not theft. But in each lease there is evidence of dishonest conduct and an element of intent to defraud which has resulted in losses to innocent persons. “The Court must take into account at least to a degree, the magnitude of the transactions and what is stated to be the amount likely to be ultimately involved “I am clearly of the view that I would not be doing my duty if 1 did not impose a substantial term, and my conclusion is that the appropriate sentence is one of five years imprisonment.